Federal Reserve Board approves rule requiring for the first time that large banking organizations…

The Federal Reserve Board on Monday approved a rule requiring for the first time that large banking organizations publicly disclose certain quantitative liquidity risk metrics. The disclosures will provide market participants and the public with reliable and timely information for evaluating the financial strength and resiliency of the nation's largest banking organizations.

Under the Liquidity Coverage Ratio (LCR) rule adopted by the federal banking agencies in September 2014, large banking organizations--those with consolidated assets of $50 billion or more--and certain depository institution subsidiaries are required to hold a minimum amount of high-quality liquid assets (HQLA) that can be easily and quickly converted into cash. The amount of HQLA held by each banking organization must be equal to or greater than its net cash outflows during a 30-day stress period. The ratio of the firm's HQLA to its net cash outflow is its LCR.

The final rule requires large banking organizations to disclose their consolidated LCRs each quarter based on averages over the prior quarter. Firms also are required to disclose their consolidated HQLA amounts, broken down by HQLA category. Additionally, firms are required to disclose their projected net stressed cash outflow amounts, including retail inflows and retail deposit outflows, derivatives inflows and outflows, and several other measures.

While generally similar to the rule proposed in November 2015, in response to comments, the final rule extends the implementation timeline of the public disclosure requirements by nine months. Compliance dates would range from April 2017 through October 2018.

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